Swiss dairy giant Nestlé has suggested that it could offset potential losses as a result of its recent infant nutrition product price cut in China through similar positive "adjustments" in its nutrition business.
Speaking during an investor webcast to coincide with the publication of the company's first half results, Nestlé chief financial officer (CFO), Wan Long Martello, said that the firm could offset the impact of its Chinese infant nutrition price adjustment through other similar positive price adjustments “in the portfolio or in other categories.”
Nestlé slashed the prices of its Wyeth Nutrition infant nutrition products in China last month following the launch of a probe into suspected anti-monopoly violations by several infant nutrition product manufacturers in China by the National Development and Reform Commission (NDRC).
In response to the launch of the investigation, Wyeth Nutrition reduced the prices of its infant nutrition products in China by between 11% and 20%.
“We can manage it through portfolio management,” said Martello.
“We also, don’t forget, have a good meaningful business in China across many categories so this is a case where if you do have to do some adjustment in one category, or even on product within a portfolio within that category, you can offset it with others in the portfolio or in other categories.”
Compliance #1 priority
The NDRC announced the conclusion of its investigation yesterday - issuing fines totalling around $110m to Mead Johnson Nutrition, Fonterra, Abbott Laboratories, Danone Dumex, FrieslandCampina, and Chinese infant formula manufacturer Biostime.
Despite being initially targeted by the NDRC, Wyeth Nutrition was“exempted from punishment”alongside Japanese dairy processor, Meiji.
Martello declined to comment further on the reasons behind its exemption.
“I don’t want to comment on the NDRC decision,” she said. “I will say though that compliance is one of our core business principles at Nestlé. Compliance is number one regardless of where we operate.”
“We hold all of our business managers accountable for making sure that we’re complying with the local laws and regulations.”
“Pleased” with infant formula performance
The group recorded total revenue of CHF 45.2bn ($49.2bn, €36.7bn) between January and June 2013 – a 5.3% like-for-like increase.
Nestlé’s Nutrition division, which combines the firm’s infant nutrition and weight management product portfolios, reported 4.1% organic growth in the first six months of 2013 with sales of CHF 5bn ($5.4bn, €4.1bn).
Martello added that Nestlé is “very, very pleased” with its infant nutrition business, which achieved double-digit growth in Asia, Oceania and Africa, and near double-digit growth in the Americas.